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For more than a month, the Ukrainian army has been resisting Russian occupation in a bloody battle. Although the people of Ukraine and Russia suffer most directly from the war, the rest of the world has also indirectly fallen victim to Putin’s decisions. I have already explained the impact the war in Ukraine has had on the freight sector as a whole, but I would now like to highlight the ongoing air transport sector. It is currently suffering not only from soaring fuel prices, but also from a lack of capacity, which is also having an irreversible effect on consumer wallets around the world.

Capacity is affected not only by ban but also by destruction

In early March, two weeks after Russia’s invasion of Ukraine, Northeast Asia-Europe’s transport capacity had fallen to 22% since the pre-war period. Now, almost a month later, it is even lower. The capacity of air carriers is most affected by the sanctions imposed on Russia. As a result, the delivery of goods to Europe is banned for the largest Russian cargo airline operator Volga-Dnepr, whose subsidiary AirBridgeCargo has more than 800 different cargo aircrafts. However, this is not the only aspect that affects the capacity of hauliers. Aircrafts destroyed as a result of war, which rubs salt into the wound of the industry, also play an important role. For example, in the battle against Hostomel Airport, the industry lost a historically unique specimen – the world’s largest cargo plane, the Mriya. Although the Ukrainian government has announced that every effort will be made to rebuild the plane, it will take time and at least $ 3 billion. It has also recently been confirmed that AN-26 and AN-74 aircrafts have been destroyed as a result of the Russian invasion.

To Asia around Russia

Due to the war, many air carriers have decided not to cross the airspace of Russia, Ukraine and also Belarus, citing the safety factor of employees as the main reason. This position has been publicly confirmed by industry giants such as UPS, DHL and FedEx, which own about 1,000 cargo planes. I believe that not only the issue of security, but also the image and political pressure of the company played a major role in making this decision. Now that most companies in various sectors are leaving Russian territory, thus clearly expressing their political position, the big logistics and freight companies must not lag behind either. It is clear to them, as to any other business expert, that the image of a company is easy to tarnish but hard to polish, and the smartest way to avoid becoming a black sheep right now is to turn your back on Russia.

Consumers become the victims

A series of all the above decisions and events will inevitably increase the costs for air cargo carriers, which will not only hurt market players but also consumers. There are already companies in the industry that are increasing the additional costs for international freight. One of them is FedEx, which took such a step in March. Although the company is one of the first to change its pricing policy as a result of events, it will certainly not be the last.

The most logical solution – more cargo planes

Once again, as in the Covid-19 outbreak, when the industry was struggling with a lack of capacity, the most effective solution is to transform passenger planes into freight transport. Such restructuring of airlines would significantly increase the capacity of air cargo carriers. Moreover, according to Insider, it is more profitable than buying new cargo planes. According to the media, such a move could save companies hundreds of millions of dollars. Airlines such as Qatar Airways and the Emirates Group, known to the general public as passenger airlines, took this step in early 2020. At the end of March, Alaska Airlines joined them, adapting five different passenger planes for cargo transportation.

Whatever the future decisions of air carriers, one thing is clear: only by working together in a crisis situation will it be possible to meet the needs of both the industry and the customer.

Author: Roland Peterson, logistics expert

Image: www.pexels.com

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As a result, many flights are diverting south, but with some airspaces in the Middle East restricted or closed, airlines are limited in their options.

Diverted routes can lead to lengthy blockages on key flight corridors, which in turn causes cancellations, limited capacity for freight and potentially increased costs.

Various flight times have also increased due to the diversions, which can result in increased fuel usage and potential further increased costs, which may need to be passed on to the end customer.

Since the crisis, fuel prices have been rising; for the week ending March 4 2022, jet fuel (kerosene) cost $1,119 per tonne – an increase of 28% from the previous week, and a 45% increase since the start of 2022.

This is a concern for an industry which has already seen airfreight prices rise to two and a half times higher than pre-pandemic levels, and is still recovering from the impact of Covid-19.

Passenger travel and airfreight are intrinsically linked and in 2020, with only limited numbers of passengers flying, UK airfreight volume fell to 2,002,000 tonnes, a 21% drop in comparison to the 2,535,000 tonnes in 2019.

The sector started to see green shoots of recovery in November 2021 – according to the Civil Aviation Authority, total UK airfreight tonnes increased by 5.9%, compared with November 2020 – but, just as it starts to recover, these latest developments could once again see turbulence on the horizon for the sector.

Air cargo and road transport capacity are needed urgently to move donated food, medicines, clothing and other items to Poland and Ukraine-surrounding countries to support those affected by the war.

If capacity is to become constrained, humanitarian aid must be prioritised.

Despite the challenges facing the airfreight sector, it has a reputation for facing and solving complex problems, as highlighted in recent years.

As when transporting medical supplies throughout the pandemic, the sector will adapt to prioritise essential goods, while also ensuring the rest of the supply chain is maintained.

Logistics UK is working with the CBI to link members able to transport donated goods either via air or road and is urgently seeking air capacity to help the lift of aid to Poland, Germany and Moldova.

If any members can pledge their support, please email supplyukraine@logistics.org.uk

Source: www.aircargonews.net

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The latest figures from CLIVE Data Services, which is part of the Xeneta rate benchmarking platform, show that demand for March was 4.5% down compared with a year earlier – and 6.5% down on pre-Covid 2019 levels – marking a “sudden interruption to the recovery trend of recent months after the peak Covid disruption of the past two years”.

Capacity in March was down 3% compared with last year and 14% against 2019 levels.

As a result, dynamic load factors – accounting for both weight and volume – stood at 66%, which is the same level as recorded in 2019 and six percentage points lower than 2021 after record levels were reached that year.

Despite aircraft being less full in March than they were a year ago, rates have actually increased by 27% year on year and are up by 141% compared with two years ago.

Niall van de Wouw, chief airfreight officer at Xeneta, said this was down to disruption on the ground.

“There are also still many issues with capacity on the ground. One bottleneck got replaced with another one,” said van de Wouw.

“Load factors are lower this year than they were last year, but prices are higher. The latest disruption in Shanghai is not unexpected but it adds to the worldwide issue of staff absence because of high Covid cases.

“Pilots, cargo handling workers, truck drivers etc, unlike many others, cannot work from home. It’s hardly surprising then to hear the International Monetary Fund (IMF) blaming soaring shipping costs for driving up inflation rates.

“Right now, the airfreight and oceanfreight markets are in general a mess, with shippers and consumers having to pay the price. In the first two months of 2022, we were talking of growing resilience in the airfreight market and a recovery to pre-Covid levels. March data shows how quickly this can change.”

CLIVE also noted an increase in the placement of capacity into the spot market on certain trade lanes, such as Europe-Japan trade, where the amount of chargeable weight at a spot rate increased to 60% of the market, or 20 percentage points higher than February’s spot share.

Rates from Japan to Europe increased to around €5 per kg, nearly 50% higher than the weeks preceding the Ukraine war.

Carriers on the route had removed capacity as they sought flight paths that avoided Russian airspace.

“In overall air cargo market terms, March was a step back from the trend we saw late last year and earlier this year. We have been reminded of how the limited control the general airfreight market has over its own destiny and how it is impacted by passenger traffic trends, disruption in the ocean freight market, and geopolitical events,” said van de Wouw.

He added that ongoing disruption in ocean shipping could provide a boost to air cargo demand while higher inflation could have a negative impact.

“Although it is too soon to tell what the skyrocketing inflation numbers in the US will result to, the logistical difficulties on the water between these two continents must put some wind into the sails of the air cargo market.

“With continuously declining schedule reliability of the ocean liners, logistical departments will likely be required to resort to airfreight because of disruptions to their supply chains caused by these record low service levels,” he said.

Source: www.aircargonews.com

Image: www.pexels.com

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Traveling in rigid hull inflatable boats (RHIB), kayaks and as swimmers, protesters from Denmark, Sweden, Norway, Finland, Netherlands and Germany on Sunday went in front of supertankers Waikiki and SFC Baltica in the Baltic Sea, displaying banners with “Oil Fuels War” as Greenpeace calls on Europe to reject and ban Russian fossil fuel imports to weaken the attack on Ukraine.

Mads Flarup Christensen, executive director of Greenpeace Nordic, said, “While people suffer in Ukraine and people in Russia take to the streets pleading for peace, Putin’s oil and gas is still arriving at European ports, contributing to his war chest. Supertankers crossing our seas with Russian oil and gas are still delivering fossils to Europe. If we want to stand for peace, we must stop this and urgently get off oil and gas.”

Waikiki, owned by Greek shipping company Cardiff Marine, is reportedly carrying 100,000 tonnes of crude oil from Russia to Rotterdam, and SFC Baltica, owned by Russia’s Sovcomflot, is transporting 85,000 tonnes of fuel oil from Russia to Antwerp.

© Will Rose / Greenpeace

A new tracking service launched by Greenpeace UK has identified at least 189 supertankers carrying oil and gas from Russia since the start of its invasion of Ukraine on February 24, with 88 of them headed to Europe. Despite some countries declaring a ban on the arrival of Russian vessels, Russian cargo is still arriving via ships registered to other countries.

Russia is the largest source of the European Union’s fossil fuel imports. Europe spends up to $285 million per day on Russian oil, which funds Putin’s war effort, according to the Transport & Environment (T&E) thinktank.

Last week in France, Greenpeace activists confronted Russian liquefied natural gas (LNG) carrier Boris Vilkitsky at sea, and earlier this month 20 activists from Greenpeace Germany painted ‘No Coal’ and ‘No War’ on the side of the bulk carrier Grant T loaded with 100,000 tons of Russian coal as it approached the port of Hamburg.

Dockers in France, the U.K. and the Netherlands have already refused to unload fossil tankers coming from Russia. And the Swedish Dockworkers Union decided on Thursday to block ships from Russia.

© Jean Nicholas Guillo / Greenpeace

Source: www.marinelinks.com

Image: www.pexels.com

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Whopping fuel prices

The war has affected the logistics and freight industry both directly and indirectly. One of them is the rise in fuel prices, which has been felt by every driver in recent weeks. Fuel prices have now reached unprecedented heights. In America, for example, this increase was last seen more than a decade ago. This inevitably affects the costs for carriers, which in turn raises the price of the service. For example, according to Freightos, global air freight rates from Asia and Europe have risen by about 80% since the end of February, reaching $ 11.86 per kilogram. Higher shipping costs are likely to affect not only carriers but also consumers. Market comparisons are already showing significant price increases for commodities such as aluminium, wheat and exotic fruits.

Longer routes

More than 2,500 flights from the United States used Russian airspace in January, according to aviation data company Cirium. However, at present, due to security, sanctions and political stance, many carriers no longer deliver goods to Russia and avoid including its territory in their route plans. Due to military threats, Ukraine and Moldova have also become countries with a curve in both land and air transport. This means that companies in the sector need to think about alternatives to travel around certain countries, thus extending flight times and inevitably increasing fuel consumption. Due to the difficulties caused, several airlines have cancelled flights to some Asian countries. Such a step has been taken, for example, by an industry giant such as Finnair, which has decided to cancel passenger and cargo flights to Seoul, Shanghai and Guangzhou, as well as Hong Kong indefinitely.

Lack of capacity and congestion

The state of war in Ukraine has also affected freight transport capacity, which had already fallen sharply during the pandemic due to growing demand for goods, and is now being further eroded. Why? One of the reasons is the aforementioned sanctions against Russia. As a result, Russian cargo planes have been suspended. One of the most significant losses is the banning of Russia’s largest cargo air operator, the Volga-Dnepr, in the West. The Volga-Dnepr operates a fleet of particularly large cargo ships with ramps that can accommodate unusual types of cargo, such as metro wagons, as well as large general cargo shipments. Its subsidiary AirBridgeCargo has 17 Boeing 747 jumbo jets and 777 other cargo aircraft that have been banned from operating in almost 30 countries since the sanctions were imposed. Such bans have had a significant impact on the capacity of cargo aircraft, which is also contributing to the rise in air freight rates.

Congestion at borders and ports

Sanctions against Russia are also not helping the already growing congestion at the border and in major ports. As a result, all shipments of goods entering and leaving the country are subject to special scrutiny at the border to ensure that all sanctions imposed on the country are complied with. This, in turn, indirectly affects an already disrupted supply chain, creating congestion and making it even slower than before.

The air and land transport sectors are not the only ones indirectly affected by the military conflict between Ukraine and Russia. Russia’s invasion of Ukraine is also damaging world shipping, which accounts for 80% of world trade. Many Russian ships are currently stranded in the world’s oceans and seas, unable to deliver and receive cargo because they are barred from calling at ports in the Americas, England, Canada and many European countries. In addition, the crew on board has to deal with the reluctance of foreign seafarers to help in the event of a shortage of petrol. In recent weeks, the media has repeatedly published videos showing footage of the Russian ship’s crew crying for help, which has been unsuccessful.

Security risk

The war in Ukraine has also increased the security risks for logistics and freight workers. Although most logistics companies have stopped delivering goods to Russia and Ukraine, including Maersk, CMA CGM and Hapag-Lloyd, some 140 merchant ships from other countries are currently trapped in Ukrainian ports, risking being left without food or drinking water. There have been several reports in the media about the shooting of ships and the death of crew members. For example, on March 3, an Estonian-owned cargo ship with a crew of six, including two representatives of Russia and four representatives of Ukraine, sank off the port of Odessa. Three other merchant ships were sunk in the Black Sea; one of these attacks killed a Bangladeshi crew member. Undoubtedly, the security risk in the shipping industry is now higher than ever, and events are pushing up insurance prices, urging carriers to impose a ‘war risk surcharge’ and puts people in the shipping industry in fear for their lives.

All the above factors lead to the same conclusion: no matter how much we want to send Russian freight and logistics companies to hell because of their political position, we must understand that their absence from the market makes it difficult for the entire industry to function effectively. So let us hope for an early end to the war and a faster recovery of the industry, which will benefit everyone.

Author: Roland Peterson, logistics expert

Image: www.pexels.com

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Russia’s military took control of waterways when it invaded Ukraine on Feb. 24, in what Moscow calls a “special operation”.

Ukrainian maritime officials have told Reuters fighting has left around 100 foreign-flagged vessels and hundreds of mariners stranded in Ukrainian ports.

Last week a seafarer was killed at the Ukrainian port of Olvia after a missile struck his Bangladesh-flagged cargo ship. Projectiles have hit four other vessels in recent days with one sunk.

The UN’s International Maritime Organization (IMO) convened a virtual meeting on Thursday and Friday to discuss the escalating situation.

A statement afterwards said the IMO’s Secretary-General Kitack Lim “indicated his commitment to take immediate action to realise the blue safe maritime corridor with the cooperation and collaboration of the relevant parties including littoral states”.

It said a maritime corridor would “allow the safe evacuation of seafarers and ships from the high-risk and affected areas in the Black Sea and the Sea of Azov to a safe place”.

Ukraine has accused the Russian military of targeting Olvia port facilities in a missile strike, while Russia’s embassy in Dhaka said last week the circumstances of the incident involving the Bangladesh ship were “being established”. Russia denies deliberately targeting civilians.

The IMO meeting was held with its Council, which consists of 40 member countries who are elected for two years. Non-Council member states such as Ukraine were able to make statements.

The IMO statement said separately that the Council “deplored the attacks of the Russian Federation aimed at commercial vessels, their seizures, including search-and-sescue vessels”.

The Council separately demanded that Russia “cease its unlawful activities to ensure the safety and welfare of seafarers and the security of international shipping and the marine environment in all affected areas”.

Russia’s IMO representatives could not be immediately reached for comment on Friday.

Source: www.marinelinks.com

Image: www.pixibay.com

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Classification societies provide services such as checking that ships are seaworthy, and this certification cover is essential for securing insurance and entry into ports.

In recent days, Britain’s LR and Denmark’s DNV, have both announced they were stopping or winding down their business ties with Russia.

The International Association of Classification Societies (IACS), which had 12 members previously including LR and DNV and forms the top tier of ship certifiers globally, said late on Friday it was withdrawing RS’ membership with immediate effect, which it said was “no longer tenable”, citing UK sanctions on Russia where IACS is domiciled.

“IACS deeply regrets the circumstances that have resulted in this decision,” it said.

RS did not immediately respond to a request for comment on Monday.

An IACS spokesperson said on Monday that the impact on RS of no longer being an IACS member would “depend on its various, private bilateral arrangements with entities such as shipowners and flag states”.

The spokesperson said IACS was a technical association that “develops and agrees minimum technical standards”.

“IACS will need to make various consequential changes regarding the composition of various working groups,” the spokesperson said.

“IACS is not involved in the operational and commercial activities of its members. As such, the decision whether to continue to engage bilaterally with RS will need to be taken by each IACS member individually.”

RS said in June last year it had formed a strategic partnership with leading Russian shipping company Sovcomflot (SCF), which included cooperating on the development of new marine fuels to reduce emissions and technical supervision of ice-class ships operating in the Arctic.

SCF was among the Russian entities the U.S. Treasury restricted last month from raising capital in U.S. markets, which shipping sources say will complicate transactions for the Moscow-listed company.

It was not yet clear what impact the growing restrictions would have on the safety of SCF’s fleet and their ability to sail.

Source: www.marinelinks.com

Image: www.pexels.com

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The insurance industry’s Joint War Committee (JWC) said in an advisory dated March 7 that the high-risk area had been widened to waters close to Romania and Georgia after initially adding Russian and Ukrainian waters in the Black Sea and Sea of Azov on Feb. 15.

At least five commercial ships have been hit by projectiles since Feb. 24, including one vessel that sank and another on which a seafarer was killed by a missile that struck the ship. Read full story

The new high-risk areas also extend to various inland waters and sections of the high seas, underscoring the increasing dangers.

“There is clearly a growing nervousness around the region in the insurance market, especially in relation to the Black Sea,” said Marcus Baker at insurance broker and risk adviser Marsh.

“Any future amendments to these areas will very much depend upon a further escalation of activity in the region.”

Insurance premiums for voyages in the region have soared since Russia’s invasion on Feb. 24, an action Moscow calls a “special operation”.

Many shipping companies have suspended sailings to affected ports and the United Nations’ shipping agency will convene a special meeting this week to discuss the worsening situation.

Guidance from the JWC is watched closely and influences underwriters’ considerations over insurance premiums.

The JWC advisory pointed to three ships that had been hit around the Ukrainian port of Odessa, adding that the situation is “dynamic” and being monitored closely.

The listed areas will be readjusted if the JWC believes it appropriate, the guidance said.

The JWC normally meets every quarter to review areas it considers high risk for merchant vessels and prone to war, piracy, terrorism and related perils. It had previously met in February before Russia’s invasion.

Niels Rasmussen, chief shipping analyst at trade association BIMCO, said there was a higher risk of Black Sea export disruption owing to shipping companies’ reluctance to service the area and because of increasing freight costs.

“Of particular concern to global supply is the export of wheat and maize, which is mainly loaded in the Black Sea (region).”

Source: www.marinelinks.com

Image: www.pixibay.com

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Speaking at a press conference, Lufthansa Cargo chief executive Dorothea von Boxberg said this is because of restrictions for global fleets. Russian carriers are restricted by airspace sanctions by the European Union, UK and US, European carriers are not able to fly over Russia and Ukraine, while, Japanese carriers are flying around the Russian airspace and Middle Eastern airlines have seen no changes.

Two high profile airlines to be affected are Volga-Dnepr Group airlines, which are not able to operate flights to Europe and North America, and Narita-hubbed Nippon Cargo Airlines that has temporarily suspended flights to Europe.

Lufthansa Cargo also calculated a 10% capacity reduction for its freighter operations from Asia Pacific to the European Union.

She confirmed that the closure of Ukraine airspace and Russia’s decision to close airspace to airlines from 36 countries has impacted operations.

“That affects some of our most important routes into China, Japan and South Korea.”

These routes would usually cross Russian space, but now a route south of Russia and Ukraine is being taken that means flights take 1.5 to 2.5 hours longer than normal. However, as the average door-to-door time of a shipment is five to six days, this extra time won’t make much difference to shippers.

“It is more a question of the capacity that is missing than the time of getting it transported.”

Payload restrictions are also an issue.

“We’ve got the 777 which is a great aircraft, I think the only one that would do these distances and payloads without intermediate stops. But then it cannot carry the 100 tons anymore. That’s why altogether it means something like a 10% reduction in our available freight capacity.

“The capacity of course is still there but in terms of tonnage we can transport, it will about that less (-10%).

Source: www.aircargonews.net

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